Yesterday was a big, bad day for the bond market with the hotly-anticipated ISM Non-Manufacturing data coming in much stronger than expected.  Bonds confirmed their focus on the econ data with heavy volume and heavy selling.  Yields ultimately hit the highest levels since the mid-September spike--something that felt "too fast, too soon" at the time.  This time around, yields have been plodding higher for weeks.  After a surge in volatility over the past 5 trading days, yesterday brought yields right back to that plodding uptrend.

Yesterday's yields also force us to expand the range we've been watching.  This is a normal occurrence because markets rarely follow the trend-lines suggested by the first few highs/lows in a trend.  The adjustment is fairly moderate (barely noticeable unless pointed out), but here's how it looks (yellow line is old and teal line is where it will be adjusted).

20191106 open

Cleaning things up and here's the new consolidation trend:

20191106 open2

There's no special significance to this trend, nor to the 1.80% convergence yield.  1.80% has been and will continue to be one of several important pivot points in the sub-2.0% zone.  Simply put, breaking and holding below there would be good (obviously).  It would help defuse some of the fear that rates have entered a bigger-picture uptrend, but to reiterate yesterday's message, that fear is almost entirely dependent on economic data in the coming weeks/months.  If there's a key supporting actor, it would be the signing of the phase 1 trade deal between the US and China.  The market is definitely pricing a good amount of that in to current levels, but there's also definitely more pain to come from confirmation.

There are no significant economic reports today, but we may get a decent reaction to the 1pm 10yr Treasury auction because it can act a quick gut check for traders' willingness to "buy the dip" in bond prices.  Breaking above the yellow line would be bad sign (it's around 1.872 today) and breaking above 1.90% would be worse.  Either way, the default game-plan is to view any rally skeptically until it brings more to the table than last week's rally (quite a bit more... as in, enough to get yields to visit the bottom yellow line).

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
101-11 : +0-06
10 YR
1.8270 : -0.0380
Pricing as of 11/6/19 9:44AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Wednesday, Nov 06
7:00 Mortgage Refinance Index w/e 2066.0
7:00 MBA Purchase Index w/e 247.2
8:30 Labor Costs Preliminary (%) Q3 2.2 2.6
13:00 10-yr Note Auction (bl)* 27